The FED saves the market!!! The FED saves the market!!!

NOT!

Once again the Fed has interferred with the capital markets in a destructive way. While this Waxie me is all for the Fed supporting the system in a constructive way, the notion that the Fed is now going to stem the drop in home prices is absurd and irresponsible.

Further, it will lead to even more bank failures. And, finally, it's good we now live in a socialist country. Since that's the case, the government should start by paying for my health care! I never thought I would see a Republican administration act more liberal than both Demoncrats and are more closely aligned with communism then they are their own party edicts. And, I'm not a Republican, frankly these days I would like to start my own party, you guys and gals can all join me. It'll be something like the "Independent Traders" party. I think I can run for President with my platform being that I'll just shoot for the hip. At least I'll be honest about it.

OK, so I got a couple of emails from clients this weekend asking me about the financial sector and where I see it headed. I love SKF if it can dip to $100. That's severely strong support and while the market is capable of once again misinterpreting this Fed move with FNM and FRE, which was a given and anticipated by EVERYONE anyway, ultimately we should end up right where we always have in this bear market. We get a pop off a stupid Fed strategy and then we head even lower. I think this large gap up, assuming it holds from Friday, is very fadeable. Not sure we just die Monday, maybe we get a bounce that lasts a few days even, but ultimately we should be under 11,000 (I think under 10,500) sometime in September.

Another large regional bank was taken over by the Fed this week in Georgia. There are going to be 100s if not 1000s of such shutdowns and takeovers before this is over. The Fed can't bail out the world and we are unfortunately now keenly entrenched in a global recession and probably depression. The Fed should back up FNM and FRE debt. They have to, but they certainly should not be trying to prop up the real estate market. I watched part of Booyah-head on Friday. I have to say, he should just go work for the Fed since they seeem to listen to every knucklehead idea he has. The notion that the Fed adjusting everyone's mortgage to keep people in homes they can't afford is patently irresponsible. And, it also rewards, at tax payer expense, people who simply made bad investments. At least it appears they will not be bailing out shareholders of FNM and FRE, so those two stocks should head to the ZERO I said they both would months ago (FNM is on our TOP Short list from $20s with a prediction of ZERO as a target).

And, hence why this is a VERY bearish (ultimately) move by the Fed for the market, particularly the banking sector. What the Fed has made clear now, with BSC and FNM and FRE is that they will willingly bail out the system, but they won't (at least up til now) bail out shareholders. So, when C or JPM or LEH or MER or WB or (for sure) WM are ready to fold, and many will, the Fed will bail out the debt, but they won't pump up the stock prices. So, these stocks remain GREAT shorts. Look at SKF, its only about 30% off the 52 week lows. It's already pricing in a recovery, which is absurd and completely disconnected from reality.

I said Friday would be interesting and we should get a bounce, and we did. This week will be very telling. If we can not hold a gap on Monday we should see under 11,000 very soon, probably this week. The Fed is quickly running out of bullets and the world's economy and markets are crumbling. To think we are immune is, as always, Rose colored thinking and doomed to failure. Use any strength here to sell your investments is my call, and if SKF sees $100 I would look to take the Oct. or Nov. $100 or $110 calls and hold them. Tech is really starting to roll over here, even with the late day pop, AAPL and GOOG both were down decently. I would watch them for further weakness.

We shall see soon enough! RULE!

Waxie